Dell Buyout Rumors Have CIOs Assessing Vendor Risk

Rumors of Dell Inc.'s potential leveraged buyout by an equity firm have some customers wondering if and how such a deal could impact their IT investments. Though some CIOs worry that distractions resulting from such a deal could derail the company’s technology roadmap, they also said they would easily switch to another vendor of computers, servers and storage — such as Hewlett-Packard Co. — if they needed to.

Silver Lake Partners was reportedly in discussions Tuesday with Dell for a leveraged buyout at around $13 to $14 a share, according to the WSJ. The buyout group would include the private-equity firm, at least one other investor such as a pension or sovereign wealth fund, and Dell CEO Michael Dell. Reached via email on Wednesday, a Dell spokesperson declined to comment on the speculation.

Joe Drouin, CIO of Kelly Services Inc., said the company uses Dell computers to run its suite of business applications. It uses about 10,000 to 12,000 Dell computers. Dell software engineers also provide the company services, such as helping design Kelly’s data center. He said he is concerned Dell could become distracted by a buyout. “They’ve done cool things with technology and you hate to see that get derailed,” Mr. Drouin said.

Michael Bahorich, CIO of oil and gas concern Apache Corp., which uses Dell personal computers and servers (he declined to say how many), said the rumor “makes you pause a little bit and think about the possible outcomes,” such as the risk of declines to Dell’s customer service.

Manish Kapoor, senior vice president of information management systems at NuStar Energy L.P., which runs about 2,000 Dell PCs, said it is unlikely Dell would neglect its customer commitments. “There is so much cutthroat competition in the IT market that the last thing you want is an upset customer, because it’s so easy to switch,” Mr. Kapoor said.

Other CIOs also expressed the sentiment that it would be easy to switch from Dell if necessary.

Lynden Tennison, CIO of Union Pacific Corp., said Dell accounts for about 50% of his corporate desktops and servers. He said he would have no qualms about switching to Hewlett-Packard or Lenovo to meet his hardware needs. “If Dell weren’t there, I would flip to another player,” Mr. Tennison said. However, he said he would like to see Dell stick around because “they’ve been a good company.”

In a statement obtained Monday, Dell said it is continuing to add “skills and capabilities.” The company also said “We listen to customers and we learn from them.”

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